To boost productivity in the future, Asian governments will have to implement well-targeted structural reforms today.
After five years of negotiations with countless disagreements and obstacles, trade ministers of 12 TPP member states reached the final consensus on the world’s largest free trade agreement on October 5 evening. Before the agreement is officially signed, TPP must be approved by the heads and parliaments of the 12 member states countries. VN economy to prosper According to many experts, the TPP will create momentum for Vietnam’s economic development. Vietnam’s economy is expected to benefit most from the TPP as it will help the country reach markets that are still closed to the country. Economist Le Dang Doanh said that this is an important milestone for Vietnam’s economy. Vietnam is the country with the lowest level of development among TPP member countries. “We import aircraft and software from the US and export agricultural products, textiles and footwear to this country. Vietnam’s exports can rise greatly. Also, many foreign investors will invest in Vietnam to benefit from the incentives that Vietnam enjoys,” said Doanh. However, Doanh pointed out major challenges for Vietnam such as technical barriers like standards on design, packaging, antibiotic residues, chemicals, labor conditions. Therefore, Vietnam needs to improve economic conditions of local enterprises to take advantage of the opportunities brought about by TPP. Mr. Sudhir Shetty, Chief Economist of the World Bank in East Asia and the Pacific, said that TPP would bring many benefits to Vietnam in the long term. This is a tremendous boost to Vietnam but it will also bring about a lot of pressure on domestic manufacturers, who will have to compete more fiercely but this will also help boost performance. Shetty said that with the best scenario, the TPP will help member countries have access to markets which are previously inaccessible. Besides, with participation in TPP, Vietnam’s GDP can increase by 8-10% by 2030 and the country can attract more foreign investment. A research work indicates that the TPP can bring about $3.7 billion each year for Vietnam’s GDP. Dr. Nguyen Duc Thanh, Director of the Vietnam Economic Policy Research Institute, said: “The increase in Vietnam’s GDP when we join the TPP is an increase in consumption, exports and investment, including FDI and domestic investment. The biggest advantage of Vietnam after joining the TPP would be promotion of exports.” Vietnam Ambassador to the US Pham Quang Vinh said that the TPP is the “trade agreement of the century” because it sets a very high set of standards in terms of trade, technology, intellectual property, environment, and labor while allowing deep tariff reductions (nearly 0%). According to the American Chamber of Commerce in Vietnam (AmCham), the TPP has important implications for all member countries, especially Vietnam in terms of exports, GDP growth, and job creation. Textiles and garments to benefit For textiles and garments, the key export items of Vietnam, TPP parties have agreed to phase out tariffs on these products. Most tariffs will be eliminated immediately, although tariffs on some sensitive goods will be eliminated over a longer period. Minister of Industry and Trade Vu Huy Hoang said that with the TPP, Vietnam’s textile industry will grow faster. This will benefit the poor because the industry needs millions of workers. The countries participating in the TPP are important export partners of Vietnam, particularly the US and Japan. Up to 40% of Vietnam’s export goods are to 11 countries in the TPP. Vietnam mainly exports garments and footwear to the TPP countries, accounting for 31% of total value. In particular, Vietnam is the second-largest garment exporting country to the US (after China). and the third-largest in the Japanese market. A recently released report of BIDV Securities Company says that after joining the TPP, the import structure of input materials of Vietnamese textile enterprises will see a big change, with the sources of supply to shift to the TPP member countries, reducing dependence on imported materials from China and Taiwan. The access to a $20 trillion market TPP is a free trade agreement with the participation of 12 countries including Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, Vietnam and the US. This will be the biggest trade deal ever since 1994, after the launch of the World Trade Organization (WTO). Although facing greater competition, Vietnam will have the opportunity to reach a broad market that accounts for up 40% of the world economy and 30% of global trade, and is expected to contribute to the world GDP with nearly $300 billion annually. Notably, all 12 member countries are also members of the Asia Pacific Economic Cooperation Organization (APEC) with a population of 650 million and a total GDP of $20 trillion. “The agreement reached today by the countries negotiating the Trans-Pacific Partnership is a very positive development,” said the IMF Managing Director Christine Lagarde in a statement released on October 5. “The agreement is not only important because of the size, as the signatory countries account for about 40 percent of global GDP; it also pushes the frontier of trade and investment in goods and services to new areas where gains can be significant,” she said. “We would need to review all the details before offering a comprehensive assessment, including the transitional effects and spillovers, but I expect that the TPP can pave the way to a new generation of deep trade integration efforts. I encourage other countries to renew their efforts to complete ongoing negotiations and the broader international community to reignite multilateral trade initiatives to ensure a cohesive global trading system.” Vietnamese businesses excited about TPP Immediately after the end of negotiations for the TPP, many Vietnamese entrepreneurs shared their excitement on Facebook and with media. The head of Khai Silk Corporation wrote on his personal Facebook page: “Fortunately, the TPP has been completed”. It included a symbol meaning “Feel wonderful”. Entrepreneur Do Ngoc Minh, the boss of LUALA hi-fashion system, noted on his Facebook: “Good news for the first day of week! Hope the Vietnam economy will thrive!” In a message to the media shortly after the completion of TPP, Pham Hong Hai, CEO of HSBC Vietnam, said: “This is a meaningful step forward for global economic integration in the world that is not only becoming increasingly connected but also more interdependent.” He added that the TPP would help increase incomes and living standards of the developing economies in Asia. Vietnam is expected to greatly benefit from the TPP from the growing demand for textiles and footwear. Meanwhile, Tran Vu Hai, Director of Hanoi Law, commented: “For law firms, it will be a period for professional development.” Nguyen Ba Ngoc, Chairman of NBN Media, said: “The TPP also shows that we need to innovate strongly and thoroughly to take full advantage of the the power of integration. Vietnam’s benefit from the TPP depends on its internal capacity and the policies of the State.” By Tran Cham/Na Son – english.vietnamnet.vnThe post Vietnam enters new playground after TPP negotiation ends appeared first on Asean Investment | Marc Djandji Blog.
THERE is no question that the Southeast Asian region, as embodied in the Association of Southeast Asian Nations (Asean), is the bright spot of the global economy, and will remain so for years to come. The region is moving toward more economic integration not only to enhance the individual countries of Asean, but as a buffer and protection against other regions and, of course, China. No one knows exactly how this integration is going to play out. It will be a mostly free-trade zone, but without a common currency similar to the North American Free Trade Agreement. There may be some lifting of travel requirements to cross borders, but nothing like the Schengen area of Europe, which has abolished passports. Investment flow will be increased between Asean members, but there will still be some restrictions and, frankly, hesitation and caution about letting full completion of many economic sectors. However, there is little doubt that Asean members are committed to move forward as much out of necessity in the current global environment as from a desire to help each other improve. The Asean members are a very mixed bag of economic development and progress from Cambodia and Myanmar to Singapore and Malaysia. But there are some common interests and traits which may be able to hold the Asean integration together without too many problems. Part of the reason that Asean integration will be successful is that it has been a process, almost an informal joining over many years. The stock exchanges in Singapore, Malaysia and Thailand launched the so-called Asean Trading Link in 2012. This platform was designed to facilitate investors being able to trade on the home stock-market listed shares of companies in the other countries. But three stock markets do not make for a regional exchange. In fact, the Asean trading link was first only Singapore and Malaysia, which makes sense since those two countries are already closely integrated with some large companies being as much Singaporean as they are Malaysian. Philippine Stock Exchange (PSE) CEO Hans B. Sicat said this past week that the PSE intends to join the trading system as early as 2016. This would be a good move for both the Philippines and the Asean. There are problems with integrating government rules and regulations across borders that must first be resolved, perhaps requiring some changes in Philippine securities laws. Sicat said that Filipino investors are not currently allowed to buy stocks abroad through brokerage accounts at home, which is typical of our misguided protectionist policies. Hopefully, some in the legislature will recognize the need for the PSE joining the regional stock markets and will champion this cause. This is good for the Philippines, and it is good for Filipino investors. By businessmirror.com.phThe post Asean regional stock market appeared first on Asean Investment | Marc Djandji Blog.
TOKYO—Japan said Indonesia has chosen China’s bid over its own to build a $5 billion high-speed rail project on the island of Java, ending a drawn-out process that included two unexpected reversals by Jakarta in the past month. The decision would mark a victory for Beijing as it challenges Japan’s influence in Southeast Asia, where Tokyo has long had closer ties, partly by ramping up investment in infrastructure projects across the region. Chinese Foreign Ministry spokesman Hong Lei told reporters Tuesday that Beijing supports cooperation between Chinese state rail companies and Indonesia, but he didn’t confirm that China had won the bid. Sofyan Djalil, Indonesia’s national planning minister, delivered Jakarta’s decision toYoshihide Suga, Japan’s top government spokesman and a close aide to Prime MinisterShinzo Abe, during a visit to Tokyo on Tuesday, the Japanese government said. Mr. Djalil was sent as an envoy of Indonesian President Joko Widodo. Attempts to reach Mr. Djalil for comment weren’t successful. Rini Soemarno, Indonesia’s minister for state-owned enterprises, declined to confirm Tuesday that China had been awarded the project. But she said Japan had asked for a loan guarantee from the Indonesian government, which disqualified its bid. The long-discussed, multibillion-dollar project has faced delays and seen proposal changes. According to a news release posted Tuesday on an Indonesian government website, Cabinet Secretary Pramono Anung said the government had decided to reduce the speed of the train from the initial project, and that it would soon decide on whether to continue with the project. He said a final decision would come from the office of Indonesia’s coordinating minister for the economy, Darmin Nasution. Mr. Nasution couldn’t be reached for comment Tuesday. Japan’s Mr. Suga expressed frustration with Indonesia’s handling of the project, saying large infrastructure projects should be implemented fairly and transparently, taking feasibility into account. The apparent choice of Beijing marked the second surprise from Jakarta this month. On Sept. 4, Indonesia said it had canceled plans for its first high-speed train, a 150-kilometer (93-mile) line between Jakarta and Bandung, discarding competing proposals from China and Japan. At the time, Mr. Djalil cited the two proposals’ need for Indonesian government financing as the reason for the decision and said the government would seek bids for a slower train that would cost about 40% less. China has since offered to build the high-speed link without requiring any taxpayer money or loan guarantees from Indonesia, Mr. Djalil told Mr. Suga, the Japanese government said in a statement. Mr. Suga said Japan is confident it presented the best possible proposal that could be implemented. The high-speed rail project had been viewed by both Japan and China as a step toward securing more projects both in Indonesia, which has a population of more than 250 million people, and across the rest of fast-growing Southeast Asia, which currently lacks high-speed trains. China has ramped up investment in Southeast Asia in recent years. Its creation of the new Asian Infrastructure Investment Bank has posed a further challenge to Japan, which controls the Manila-based Asian Development Bank. In an apparent response, Mr. Abe announced in May a plan to expand Japan’s financing for infrastructure projects in Asia by 30% over the next five years. Indonesia’s decision marks a setback for Mr. Abe, who has also sought to deepen ties in Southeast Asia to generate business for Japanese multinationals. Tokyo has historically enjoyed stronger ties with Jakarta, which is one of the largest natural gas suppliers to energy-import dependent Japan. Messrs. Abe and Widodo agreed in March that the two countries will cooperate in maritime security in response to growing concerns over China’s stance in the South China Sea. Kenichi Ohno, development economics professor at the National Graduate Institute for Policy Studies in Tokyo, said it was unsurprising that Japan apparently has lost to China. “It can’t compete against China in terms of price,” Mr. Ohno said. “Japan should shift away from building plants and railways, and toward building human capital such as through education.” By MITSURU OBEThe post Japan Says China Wins Indonesia Rail Contract appeared first on Asean Investment | Marc Djandji Blog.
MANILA, Philippines – The Philippines remains an attractive investment destination among companies from Hong Kong and China despite ongoing territorial disputes. “There’s tremendous interest in what’s going on in the Philippines. It is not only Hong Kong companies but also mainland Chinese companies that are in Hong Kong. I hope we’ll see more companies coming into the Philippines soon,” Invest Hong Kong Director General of Investment Promotion Simon Galpin told The STAR in an interview. According to Galpin, more Hong Kong and Chinese firms are currently looking to see which part of their businesses is well suited to be in one of the region’s fastest growing economy. “It took time for the Philippine economic story to get through but I think it now has not only among the mainland and Hong Kong business community but also the large international business community. The Philippines is definitely the economy people are watching,” he said. “The fact that the Philippines has done so well in business process outsourcing is an indication. The Philippines is definitely a good news story,” Galpin added. Investments from Hong Kong that have qualified for investment incentives from Philippine government are currently among the biggest in the country according to the Department of Trade and Industry. Galpin said the number of Hong Kong and Chinese firms showing interest in investing in the Philippine market is not the only one increasing but Filipino companies looking to invest in Hong Kong as well. “We’re starting to see an increase now and with a little bit more push, we can encourage more companies to take the next step,” he said. Galpin cited technology, training and education, and consumer product sectors as potential growth areas in Hong Kong for local businesses. “Hong Kong imports all its food products but we’re a major food market because we have so many visitors. So we’d like to think companies in food and beverage sector can benefit in Hong Kong too,” he said. “At present, we’ve got the (Filipino) big guys. We’ve got the banks, airlines, some big companies using Hong Kong for mergers and acquisition. What I would love to see is the medium sized companies. Companies that are already doing well here but want to take the next step and do something overseas. We want them to consider Hong Kong as their next step. Medium companies, if they have a competitive product, a competitive service, we’d like to think they can do well in Hong Kong also,” Galpin added. The Philippines last Thursday forged a new agreement with the Hong Kong government to bolster investment cooperation between the two economies. The DTI signed a memorandum of intent with executives from InvestHK pledging mutual cooperation on investment promotion exchanges and best practices.The post Philippines remains attractive to Chinese investors appeared first on Asean Investment | Marc Djandji Blog.
NDO/VNA – Vietnam will be Country of Honour at the 2016 China –ASEAN Expo (CAEXPO), Secretary General of the CAEXPO Secretariat Wang Lei announced on September 21. Addressing a press conference in Nanning city, the Chinese province of Guangxi where the CAEXPO 2015 was recently held, Wang said the decision was reached during the 12th CAEXPO senior officials’ meeting on September 20. The Country of Honour mechanism was first introduced at the CAEXPO 2007. It is rotated among ten ASEAN member countries – Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand and Vietnam. This year, Thailand was named as the Country of Honour. According to Wang, the CAEXPO 2015 attracted 85 groups of investors and buying mission, up 5% last year. Popular products such as rice, coffee, wooden furniture and handicrafts, as well as China’s packaging and food processing equipment and electronics and electrical appliances grabbed the attention of buyers. Many deals were signed, including a memorandum of understanding between the Bank of China’s Bangkok branch and the China-ASEAN Investment Co-operation Fund, and 34 projects involving machinery production, automobile spare parts and construction materials. Fringe events include 27 thematic seminars and forums featuring China – ASEAN co-operation across investment, e-commerce, electronics, pharmaceuticals, mining, finance and tourism, together with 84 trade promotion and investment programmes. Initiated by China, the first CAEXPO was held in Nanning in 2014 in order to promote a free trade zone between the two sides. The event has since become an annual platform for thousands of Chinese and ASEAN businesses. By nhandan.com.vnThe post Vietnam to be Country of Honour at CAEXPO 2016 appeared first on Asean Investment | Marc Djandji Blog.
NANNING, (Xinhua) — Zhang Ping, owner of a northeast China power technology company, described his trip to the 12th China-ASEAN Expo in the southern city of Nanning as a success. “I have talked with people from the Philippines and Indonesia and they are very interested in working with my company,” he said. Zhang’s company works on research, design and manufacture of equipment used in the energy industry including thermal and nuclear power. “Our technology is comparatively advanced and at reasonable prices,” he said. “Our products meet the needs of ASEAN members building infrastructure.” Cooperation in production capacity has been a focus of the four-day expo. Addressing the opening ceremony, Chinese Vice Premier Zhang Gaoli said, China boasts advantages in production capacity including equipment, technology and managerial experience. ASEAN members are actively promoting industrialization and urbanization, and are in urgent need of equipment, technology and capital. During a forum on international production capacity and equipment manufacture, Lao deputy minister of planning and investment Bounthavy Sisouphanthong said that Laos is in need of advanced production capacity. In the short term, his expects more technological support and technology transfer in the areas of energy manufacturing, agriculture, education, medicine and services. In the long run, Laos is looking for help in human resources development. Chhoun Dara of Cambodia, said, the Belt and Road Initiative will help production capacity cooperation between China and ASEAN. The Belt and Road Initiative was proposed by China in 2013 as a trade and infrastructure network. It will connect Asia with Europe and Africa through the Silk Road Economic Belt and the 21st Century Maritime Silk Road. Ning Jizhe, deputy head of China’s National Development and Reform Commission, said China and ASEAN members have a priority for cooperation. China has comparatively advanced equipment and technology, making cost effective products. China and ASEAN have mutual needs and complementary advantages, Ning said. Cambodian Contingent Also attending the expo, representatives from Sihanoukville special economic zone in Cambodia are seeking investment from China and other ASEAN members. Richard Zhu with the zone marketing department said Cambodia is rich in natural and labor resources and in need of China’s advanced production capacity and equipment, and has reached some preliminary cooperation agreements with Chinese companies in solar power and iron and steel. Lin Zhiguang, a Chinese businessman who established a construction company in Cambodia, said China is transferring part of its capacity to places such as Southeast Asia and Africa. There are over 10,000 Chinese business people investing in Cambodia, with their focus mainly in agriculture, mechanical equipment and education. Zhang Xiaoqin, vice governor of Guangxi, said while developing countries are promoting industrialization and urbanization, developed countries are stressing re-industrialization. Against this background, international production cooperation is a good way to drive economic growth. By XinhuaThe post China, ASEAN eyes production capacity cooperation appeared first on Asean Investment | Marc Djandji Blog.
By any metric, Asia is increasingly assuming the mantle of a global commercial powerhouse. Despite a current slowdown in the Chinese economy, the Asia Development Bank has forecast the region to grow by 6.1 percent this year, and countries such as India and Indonesia present businesses with huge potential markets. Operating in this diverse, dynamic and at times volatile region poses risks that investors and business leaders need to navigate in order to ensure every chance of success. Many of these risks are complex and intertwined, mixing politics and economic policies with national movements and religious extremism. In light of this, investors seeking to understand Asia’s conditions on the ground might benefit from considering five major risks that have the potential to disrupt the region’s business environment over the coming months. Democracy under strain? The year ahead looks fairly bleak in terms of democratic governance. Regimes across Asia are turning their backs on liberal reforms and the principle of transparent government. In Thailand, the military junta seems in no hurry to relinquish power and has acknowledged that its original commitment to hold elections will not be met by the end of 2015. The generals there are also set to cement some form of permanent political role for the military in the new constitution currently being drafted under the army’s supervision. Across the border in Myanmar, after much fanfare, the march toward democratic reform has also stalled. In June, two of the most crucial barriers to reform were upheld by lawmakers in a vote on constitutional amendments. The first is a bar against opposition leader Aung San Suu Kyi from becoming president, the second is a de facto military veto in parliament. It seems extremely unlikely there will be any major concessions before parliamentary elections in November, ensuring that the military will retain its political dominance. Further, observers fear that neither campaigning nor voting will be free or fair. Tentative steps toward democracy are also likely to be challenged in various ways in countries such as Malaysia and Sri Lanka. This drift away from democratic governance and transparency is likely to undermine investor confidence across a range of emerging markets. Integration vs. protectionism Competing priorities within Southeast Asian countries will match the prospect of regional economic integration against the notion of protectionism. Closer economic integration between the 10 member states of the Association of Southeast Asian Nations (ASEAN) — in the form of the ASEAN Economic Community (AEC), which is scheduled to be completed by the end of 2015 — carries the potential to fundamentally alter the investment landscape. And yet rising economic nationalism in some ASEAN countries threatens the implementation of the AEC. Cross-party support for protectionist policies in countries such as Indonesia, which is the bloc’s largest and arguably most important economy, suggests that progress toward integration may face resistance. Indeed, the halting pace at which certain foreign-ownership caps and nontariff barriers between member states are being removed has raised concerns over the practicality of even completing the AEC project on time. ASEAN’s commitment to non-interference in the internal affairs of member states means there is little possibility of countries being penalised for noncompliance, making the completion of the AEC by the end of the year increasingly unlikely. East Asia – nationalism on the march Widening nationalist tendencies will also remain a key geopolitical risk in East Asia. Although the handshake shared by China’s president Xi Jinping and Japan’s prime minister Shinzo Abe in April was warmer than the frosty affair that took place toward the end of last year, full reconciliation remains a distant prospect. Diplomatic relations between Beijing and Tokyo were strained for much of 2014 because of an ongoing territorial dispute in the East China Sea, adding to a toxic historical legacy stretching back to the Second World War. Given the volatile nature of this relationship, the direction of Sino-Japanese affairs could easily take a negative trajectory. The month of September marks the 70th anniversary of the end of the Pacific war against Japan, known in China as the ‘War of Resistance’. High-profile commemorative events planned by Beijing throughout this year have the potential to further stoke anti-Japanese nationalism, either intentionally or inadvertently. In all likelihood such a development would lead to a further fall in Japanese investment in China, as investors look for more stable opportunities. As Mr Abe continues to advocate for a stronger Japan – in an economic, political and military sense – Tokyo too will have to navigate East Asia’s tense geopolitical environment cautiously during this particularly sensitive period. An arms race in Asia? The continuing rise of regional defence spending and military modernisation, spurred on by geopolitical tensions and territorial disputes, is another critical issue in the spotlight. Whether this trend constitutes an arms race in any traditional sense is an open question. It could be argued that many Southeast Asian nations are simply reaping the benefits of strong economic growth to upgrade their outdated military assets. Nonetheless, a move for improved surveillance and naval warfare capabilities is apparent, reflecting the role that maritime security is playing on strategic decision making across coastal countries in the region. This trend encompasses states directly embroiled in maritime disputes – such as Vietnam, the Philippines, Japan and China – as well as other nations, including Indonesia and India. Asian nations will continue to boost their defence capabilities, with many seeking to at least narrow the vast arms gap that exists between themselves and China. As a result, geopolitical tensions will remain high for the foreseeable future, which will in turn increase the incentive to further strengthen military capabilities. While the impact of these tensions on business is at present minimal – and the prospects for tensions erupting into armed conflict seemingly remote – investors must remain wary while governments continue to pour so many resources into defence. Threat of radical Islam Finally, governments across the region are increasingly wary of the threat that radical Islamist groups, such as Islamic State and al-Qaeda, are likely to pose in the coming months. South Asia now has to contend with a rebranded and potentially reinvigorated terrorist franchise, al-Qaeda in the Indian subcontinent, alongside more established threats emanating from groups based in Pakistan. Separately, Beijing fears that nascent links between its own marginalised Muslim Uyghur population in China’s western Xinjiang region and the international jihadist movement could lead to a further increase in domestic attacks. Southeast Asia, particularly the Muslim-majority states of Indonesia and Malaysia, has proved a fertile recruiting ground for Islamic State in the past year, and as a result, the region faces a rising threat. There is increasing evidence that radicalised fighters with combat experience returning from Iraq and Syria are seeking to attack Western interests. Observers will closely monitor the measures that individual governments adopt in the coming months, including the prospect of broader multilateral antiterrorism cooperation, in order to deal with threats posed by radical Islamist groups. While operating in any environment carries a degree of risk, the growth of the risk analytics and strategic forecasting industry means that contemporary leaders are better equipped to deal with today’s ever-shifting business conditions. Identifying risks and formulating an appropriate mitigation strategy are no longer seen as luxuries, but as necessary first steps for businesses seeking to insulate their operations from unexpected events. In fact, those failing to do so may experience serious negative impacts on their assets, personnel, supply chains and business continuity. By Hugo Brennan – financierworldwide.comThe post Asian investments: five key risks to watch appeared first on Asean Investment | Marc Djandji Blog.